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Which one of these statements is true? a)Start-up businesses do not have any options until they...

Which one of these statements is true?

a)Start-up businesses do not have any options until they have succeeded for one year.

b)Abandoning a project will lower the project's value.

c)Every business idea has at least two possible outcomes.

d)Every business will benefit if it exercises its expansion option.

e)if virtually all projects have embedded options, then ignoring these options does not affect the value of the projects.

2.

The lower bound of a call option:

can be a negative value but only when the exercise price exceeds the stock price.

can be equal to zero.

can be a negative value but only when the stock price exceeds the exercise price.

can be a negative value regardless of the stock or exercise prices.

must be greater than zero.

Solutions

Expert Solution

Question 1:

Every business idea has two possible outcomes. Some business idea comprise of innovation, problem solving technique, cost-effective or distinctive.

Hence, the correct answer is Option C.

Question 2:

The lower bound of the call is equivalent and resulting to the payoff of the option is exercised right away, paying little heed to the latest price of share.

Hence, the correct answer is Option B.

jeff jeffy answered 2 years ago
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